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Militello v. Allstate Property & Casualty Insurance Co.

United States District Court, M.D. Pennsylvania

June 16, 2015



Sylvia H. Rambo, United States District Judge.

In this civil action for breach of contract and bad faith, Plaintiff has sued his property insurance company for its alleged underpayment of an insurance claim. After suit was filed, the parties submitted to an appraisal process pursuant to the terms of the policy to resolve the amount of the loss, but Defendant subsequently withdrew from that process. Presently before the court is Plaintiff’s motion for leave to file a second amended complaint to add an additional claim for breach of contract and further allegations of bad faith conduct based upon Defendant’s withdrawal. For the reasons stated herein, Plaintiff’s motion will be granted.

I. Background

In this memorandum, the court sets forth only the factual and procedural background necessary to explain its ruling.

On January 16, 2014, Plaintiff Guy Militello (“Plaintiff”) filed a complaint against Defendant Allstate Property and Casualty Insurance Company (“Defendant”) in the Lebanon County Court of Common Pleas alleging breach of contract, bad faith, and a violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), 73 Pa. Cons. Stat. § 201-1. (Doc. 1-1.) Defendant removed the action to federal court on February 12, 2014. (Doc. 1.) On February 19, 2014, Defendant filed a motion to dismiss (Doc. 2), in response to which Plaintiff filed an amended complaint on March 5, 2014 (Doc. 3).

As asserted in the amended complaint, a horse barn owned by Plaintiff and insured by Defendant sustained significant damage when a horse struck a center support column in the barn. Plaintiff submitted a claim to Defendant for the damage in the amount of $216, 170.00, but Defendant declined to pay the claim in its entirety, instead providing Plaintiff with a payment in the amount of $102, 328.19. Plaintiff alleged that Defendant breached the insurance contract by failing to accurately assess and pay the loss, and that Defendant acted in bad faith by intentionally or recklessly making false representations for the purpose of denying the full value of the claim. (Id.)

On March 19, 2014, Defendant filed a motion to dismiss the UTPCPL and bad faith claims pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 6.) After consideration of the motion, the court dismissed the UTPCPL claim without prejudice, but denied the remainder of the motion. (Docs. 15 & 16.) The parties thereafter engaged in fact discovery, which concluded on February 14, 2015. (See Doc. 14, p. 2 of 8.)

On April 9, 2015, Plaintiff filed the instant motion for leave to file a second amended complaint. (Doc. 19.) In his motion, Plaintiff avers that the parties agreed in October 2014 to resolve the breach of contract claim by committing to an appraisal process set forth in the underlying insurance policy. (Id. at ¶ 4.) The parties did not, however, agree to resolve the bad faith claim by means of appraisal. (Id. at ¶ 5.) Nevertheless, Defendant, by and through its legal counsel, repeatedly attempted to pressure Plaintiff’s counsel to drop the pending bad faith claim. (Id. at ¶ 6.) When Plaintiff’s counsel refused to do so, Defendant’s counsel sent an email indicating that he could not “proceed to appraisal with the bad faith claim hanging over [his] head.” (Id. at ¶ 7.) After further refusal to drop the bad faith claim, Defendant withdrew from the appraisal process by letter dated February 27, 2015. (Id. at ¶ 8.) That withdrawal occurred only after both parties identified their individual appraisers and selected a neutral appraiser, and Plaintiff’s appraiser had submitted his appraisal report to Defendant’s appraiser. (Id.) Based on these averments, Plaintiff’s proposed second amended complaint, submitted pursuant to Local Rule 15.1, asserts an additional claim that Defendant breached the insurance contract by withdrawing from the appraisal process to which it had contractually committed (Doc. 19-1, ¶¶ 25-32), and includes additional allegations of bad faith related to Defendant’s withdrawal from the appraisal process due to Plaintiff’s refusal to terminate his bad faith claim in federal court (id. at ¶¶ 22(j)-(1)). The second amended complaint also contains additional substantive allegations regarding Defendant’s alleged conduct.

Defendant opposes Plaintiff’s motion, arguing that the court should not permit Plaintiff to file a second amended complaint because the additional claims, as asserted in the proposed amended complaint, were brought with undue delay and in bad faith, and because the claims would be futile as unable to withstand a motion to dismiss. (See generally Docs. 23 & 24.) Specifically, Defendant contends that it did not withdraw from the appraisal process because of the outstanding bad faith claim; in fact, it agreed to move forward with the appraisal after conceding that the terms of the parties’ agreement as to whether the bad faith claim would remain viable was unclear. (Doc. 23, p. 3 of 16.) Rather, it withdrew from the appraisal process after deposition testimony taken of two of Plaintiff’s contractors pursuant to the outstanding bad faith action revealed that Plaintiff may have committed insurance fraud by increasing the value of his claim, altering his own contractor’s estimates, and concealing the use of the property from Defendant. (Id. at p. 4 of 16.) As a result of this testimony, Defendant’s counsel sent correspondence to Plaintiff’s counsel on February 27, 2014, wherein it indicated its withdrawal from the appraisal process based upon the deposition testimony of the contractors and its intent to petition the court to amend its answer to include a counterclaim for insurance fraud. (Id. at p. 5 of 16.) Defendant contends that Plaintiff only sought to amend his complaint in anticipation of Defendant’s filing of its own motion to amend, as evidenced by Plaintiff’s purported belated filing of the motion, and that the motion is therefore brought with undue delay and in bad faith. In addition, Defendant argues that the proposed amendments are futile.

The motion has been fully briefed and is ripe for consideration.[1]

II. Legal Standard

Rule 15(a) of the Federal Rules of Civil Procedure permits amendment of the pleadings outside of the applicable time line set forth by the rule with leave of court, and directs that the court “should freely give leave when justice so requires.” Fed.R.Civ.P. 15. The Third Circuit has instructed that district courts should grant leave unless “it is apparent from the record that (1) the moving party has demonstrated undue delay, bad faith[, ] or dilatory motives, (2) the amendment would be futile, or (3) the amendment would prejudice the other party.” Diaz v. Palakovich, 448 F. App’x 211, 215-16 (3d Cir. 2011) (citing Lake v. Arnold, 232 F.3d 360, 373 (3d Cir. 2000)); Provenzano v. Integrated Genetics, et al., 22 F.Supp.2d 406, 410-11 (3d Cir. 1998). Given the liberal standard under Rule 15(a), “the burden is on the party opposing the amendment to show prejudice, bad faith, undue delay, or futility.” Chancellor v. Pottsgrove Sch. Dist., 501 F.Supp.2d 695, 700 (E.D. Pa. 2007).

The Third Circuit has repeatedly recognized that prejudice to the non-moving party is the touchstone for the denial of an amendment. Arthur v. Maersk, Inc., 434 F.3d 196, 204 (3d Cir. 2006). Ultimately, however, the decision of whether to grant or deny a motion for leave to amend is within the sound discretion of the district court. Cureton v. ...

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